Excel Lab
  • Excel Lab
  • Release Notes
  • Getting Started
    • Installing Excel Lab
      • Step 1: Download Files
      • Step 2: Register Libraries
      • Step 3: Activate Add-in
      • Step 4: Verify Installation
  • Functions
    • General
      • ISMATRIXPSD
      • MATRIX
      • XLABHELP
      • XLABINFO
      • XLABLICENSE
      • RESETPASSWORD
    • Return Models
      • CAPM
      • DESMOOTHRETURNS
      • IMPLIEDRETURNS
      • MLERETURNS
    • Risk Models
      • ANNUALIZERISK
      • EWMA
      • HISTORICALRISK
      • MLERISK
      • PORTFOLIORISK
      • TURBULENTRISK
      • QUIETRISK
    • Optimization
      • MVO
      • MTO
      • MVT
      • MVFRONTIER
      • MTFRONTIER
      • ISORETURN
    • Simulation
      • MCNORM
      • BOOTSTRAP
    • Exposure to Loss
      • LOSSPR
      • OMEGARATIO
      • SORTINORATIO
      • TAILRATIO
      • VALUEATRISK
      • MAXDD
    • Regression Analysis
      • FACTORANALYSIS
      • PSR
    • Scenario Analysis
      • MAHALANOBIS
      • SCENARIOPR
      • IMPLIEDSCENARIO
  • Frequently Asked Questions
    • Common Issues
    • FAQ
  • Further Reading
  • Windham's Research Insights
  • Watch Our Educational Videos
Powered by GitBook
On this page
  • Description
  • Syntax
  • Input(s)
  • Output(s)
  • Example
  1. Functions
  2. Scenario Analysis

IMPLIEDSCENARIO

Calculate the implied scenario estimates that reconciles with your target scenario probabilities.

PreviousSCENARIOPRNextCommon Issues

Last updated 3 years ago

Description

Solve for a modified set of implied scenario estimates given target probabilities. Reconcile your views on target scenario probabilities with implied scenario estimates across economic variables. The function follows the research published in the Journal of Portfolio Management, March 2020.

Syntax

The following describes the function signature for use in Microsoft Excel's formula bar.

=IMPLIEDSCENARIO(prTarget, initialScenariosEstimates, anchor, covariance)

Input(s)

Argument
Description

prTarget

Required. Row vector of target probabilities.

initialScenarioEstimates

Required. Matrix of initial scenario estimates where each column corresponds to a scenario and each row corresponds to an economic variable.

anchor

Required. Column vector of anchor estimates across economic variables.

covariance

Required. Covariance matrix of economic variables.

Output(s)

The function returns a matrix of implied estimates, sm,ns_{m,n}sm,n​, across MMM economic variables and NNN scenarios. The reconciled probabilities, ppp, of the implied scenario estimates are included in the final row of output.

output=s1,1s1,2⋯s1,Ns2,1s2,2⋯s2,N⋮⋮⋱⋮sM,1sM,2⋯sM,Np1p2⋯pN\text{output} = \quad \begin{matrix} s_{1,1} & s_{1,2} & \cdots & s_{1,N} \\ s_{2,1} & s_{2,2} & \cdots & s_{2,N} \\ \vdots & \vdots & \ddots & \vdots \\ s_{M,1} & s_{M,2} & \cdots & s_{M,N} \\ \hline p_1 & p_2 & \cdots & p_N \end{matrix} output=s1,1​s2,1​⋮sM,1​p1​​s1,2​s2,2​⋮sM,2​p2​​⋯⋯⋱⋯⋯​s1,N​s2,N​⋮sM,N​pN​​​

Example

Enhanced Scenario AnalysisThe Journal of Portfolio Management
Journal of Portfolio Management research paper: Enhanced Scenario Analysis
Logo
44KB
IMPLIEDSCENARIO.xlsx
Example Workbook: IMPLIEDSCENARIO